No trigger for a Canadian house price crash: CIBC economist

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No trigger for a Canadian house price crash: CIBC economist
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9 E8 D) \& J' Y! b2 e# DCanadian house prices may continue to slide but there is no sign of a crash, a CIBC World Markets economist says. (CBC)Canadians haven't put themselves deep enough in debt to cause a U.S.-style housing market bust, a CIBC World Markets economist says.

3 g' A; d; L' Y, _- ~7 ~& WIn a report issued Tuesday, Benjamin Tal asks: "Where's the trigger for a Canadian house price crash?" He concludes there isn't one.

7 Q$ A" y! V+ V1 c1 `"To be sure, house prices in Canada will continue to ease in the coming months," he says. "But the triggers that led to a free fall in Canadian real estate markets in the early 1990s and today in U.S. markets are nowhere to be found."

& Y- D" q4 p* m. r7 IAs he sees it, Canadian home buyers never got as reckless as Americans.

; K: O$ m2 A, a  T, ^  S"By almost any measure, American households entered the current housing crisis from a more vulnerable position relative to their Canadian counterparts — carrying a heavier debt load and a much lighter net worth position. And when it comes to real estate speculation, Canada was not really a player.
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, ]$ P" @1 A- ?0 ~+ a! R- B# \"But even more important than the absolute and relative level of debt is the distribution of debt. At the peak of the cycle, subprime and Alt-A mortgages accounted for no less than 33 per cent of originations in the U.S. market. In Canada we estimate that at the peak, non-conforming mortgages reached 5.4 per cent of originations."
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Subprime mortgages are those given to the least creditworthy borrowers. Alt-A mortgages are considered a step higher, although the category includes so-called liars' loans in which borrowers are not required to verify their earnings or assets.
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Tal says the U.S. meltdown is basically a subprime story.
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" Z9 N$ R4 l3 @  M! e$ H0 d9 Y"Eradicate subprime from the U.S. housing market and, instead of the most severe house price meltdown since the great depression, you get a trivial moderate cyclical slowing — something along the line of what we are currently experiencing in Canada."